Seven years later, it is clear which scenario has materialized. But up until early 2020, there was still reason to believe that tensions between the United States and China might ease. The “phase one” agreement between the two economic powerhouses suggested the possibility of de-escalation. What no one anticipated was that COVID-19 would shift policy so decisively. The pandemic strengthened arguments against trade, on the grounds that it created dangerous dependencies, even though there was still broad agreement among economists that trade enhanced resilience during the crisis. Russia’s full-scale invasion of Ukraine then increased national security-related concerns about trade, and the April 2, 2025, tariff announcement marked a decisive break with the previous trade order.
Economic historians will debate the causes of these developments. One point, however, is clear: the tariffs of 2018, initially viewed as limited and temporary, set in motion a dynamic with far-reaching global consequences. In 2019, I argued that the direct economic effects of tariffs on large economies such as the US and China would be modest, and this was largely borne out.
By contrast, I expected more significant effects for developing countries. In the short run, many of these economies did benefit from expanded exports amid the US-China trade conflict. But short-term export gains are not equivalent to long-term welfare improvements. And now, the mechanisms that contributed to the development miracles of past decades—not least access to advanced economies’ lucrative markets and knowledge sharing—are seriously under threat.
The largest cost of this new environment, however, is political. Trade policy is not only about economic outcomes; it also shapes the broader framework of international cooperation. The return of protectionism has contributed to a more fragmented and adversarial global landscape, with consequences that extend well beyond trade itself.
